According to a financial survey conducted on behalf of insolvency firm, MNP, a whopping 48% of the population have less than $200 at the end of the month, after making required debt payments and living expenses.
What makes the situation precarious is that any unexpected bill could create an irreversible debt trap.
If you find yourself in a similar situation, you can find it challenging to reverse the issue.
Need Help Reviewing Your Financial Situation?
Contact a Licensed Trustee for a Free Debt Relief Evaluation
The licensed insolvency trustees at Bankruptcy Canada are debt relief experts that are fully regulated by the Canadian federal government to provide legal debt settlement programs.
But they also offer an objective, an impartial review of your financial issues to help you understand how to get rid of debt.
Whether time is a priority for you, or whether you want to protect your assets from creditors and collection companies, we can help you to eliminate your debt and meet your financial goals.
Do you have a debt problem?
The first and most crucial question anybody who is struggling with a difficult financial situation should ask themselves is whether their debt is a debilitating issue.
Some debts can be repaid and managed over time, while others are too overwhelming to manage by yourself.
If you are unsure whether your financial situation requires a professional debt settlement solution, you need to pay close attention to your day-to-day money behavior.
Eliminating your debts means that you can prevent creditors from harassing you any further.
Therefore, people who are receiving frequent calls from collection agents should be the first to consider legal debt settlement programs that can stop them from contacting you.
If you have received a notification of legal pursuit by a creditor, you can also avoid a lot of stress and pain through an effective debt elimination process.
You may not have yet unmanageable relations with your creditors, but you are worried that your finances are getting out of control.
Typically, people who rely on credit cards as a necessity to make required payments, rather than a convenience, can accrue credit card debts over time.
Making the minimum payments towards your debts doesn’t help eliminate them.
On the contrary, you are at risk of maxing up your credit cards with no option to de-escalate your spending.
You earn less than you spend.
Typically, relying on credit cards is a clear sign that your outcome is higher than your income.
However, when credit cards are not enough to bridge the gap, you might find yourself looking for alternative solutions.
If you borrow money regularly to make it to the next payday or if you use payday loans to cover essential monthly expenses, it’s time to take back control.
Finally, if you’ve been unable to make payments on time, you might find it hard to keep a safe roof over your head.
Utility companies can threaten to cut off services.
Your landlord could consider ending your tenancy agreement.
What kind of debts can you eliminate with debt relief programs?
Not all debt relief programs and solutions are created equal.
Ideally, the best debt solution should solve all your debt problems at once; it isn’t always the case.
For instance, taking a debt consolidation loan can be an effective solution to clear your debts, but only if the loan lets you manage the whole amount that is due.
If you can’t repay the amount of money you owe even with a consolidation loan, you only increase your debt.
Therefore, you need to understand which debts can be settled.
Typically, debt relief solutions focus on unsecured debts.
You can tackle and partially or completely eliminate the following debts with most debt relief programs:
- Credit card debt;
- Outstanding bill payments;
- Payday loans;
- Private individual debt;
- Family debt;
- Shortfall for mortgage repayments;
Some specially regulated debt relief programs that are administered by licensed insolvency trustees can also eliminate government debts on top of all other debts:
- Income tax;
- Source deductions;
- student loans if you’ve left university for at least 7 years;
Licensed insolvency trustees are the only persons authorized to administer bankruptcies and consumer proposals, which can cut your debt with the government.
What does eliminating your debt mean?
However, depending on the solution you choose, eliminating debts can mean a variety of things.
The debtor needs to understand precisely what will happen to their debts and their creditors during the process.
If you have the wrong expectations about your debt management solutions, you are going to be disappointed.
Additionally, you will be left with further debt issues that will still need management.
Most debt relief solutions will offer some of the following services to help debtors regain control of their money problems:
- Some will negotiate your repayment options directly with your creditors. As a result, you can expect a reduced amount to pay if creditors agree to the negotiations.
- You can also get a reduced interest rate for loan repayment or a reduced payment period. As such, the debt isn’t eliminated, but it has been, hopefully, made more manageable.
- Most programs will offer advice and guidance to help you rebuild your financial stability. The process is designed to prevent future debts from creeping into your life and budget.
- They can design custom solutions to help you rebuild your credit score. Eliminating your debts does not remove them from your credit report. However, with dedicated advice and tips, you can gradually improve your credit rating.
- Some solutions can offer to consolidate all debts as a single payment, which you can make over a period of time. Consolidation approaches help keep track of your creditors and ensure you don’t forget payment deadlines. However, not all consolidation solutions reduce your debts or offer to eliminate them. You still have to repay the amount you owe.
Licensed insolvency trustees can provide a unique answer to eliminate your debts.
A LIT-administered debt settlement program has legal value in Canada, which prevents all creditors’ actions and legal pursuits regarding your debts.
Unlike unlicensed negotiators, a LIT carries legally binding weight in the negotiation process.
As a result, the debt is not only reduced, but it is fully eliminated at the end of the program.
You can start with a fresh slate.
What are the debt relief options available?
Canada residents can choose among 5 debt relief options.
- A debt consolidation plan is a loan that is issued by a money lending institution to pay off many small loans as one. To apply for a debt consolidation loan, you need to have a good credit rating and sufficient assets to secure your loan. The process of combining loans and bills enables debtors to make one affordable and manageable repayment every month. It can be an effective approach to credit card bills, for instance, as it allows you to reduce credit card debt interest rapidly. However, it does not eliminate or reduce your debt but makes it more manageable.
- Credit counselling is prepared with a non-profit credit counsellor who can summarize your debts and develop a repayment plan that runs over multiple years. The debt management plan enables you to pay back your debts over 3 to 5 years. The plan is negotiated between your credit counsellor and your creditors. During the negotiation, the credit counsellor can also try to discuss interest reduction; however, creditors will not reduce your debt amount. But, while you still have to pay off your debt, the interest relief gained through the plan can be enough to rebuild your financial stability.
- Debt settlement is an informal debt arrangement that a debt settlement provider makes with your creditors. The objective is to reduce your debts and agree on the payment of a portion of the money you owe. Unfortunately, creditors may not agree with the debt settlement plan. Additionally, the process comes at a cost, which can be a risk for debtors as there is no guarantee of success. Debt settlement companies may also try to charge a fee to refer your case to a licensed insolvency trustee.
- A consumer proposal is a legal insolvency process that is administered by a licensed insolvency trustee. You do not need a referral to make an appointment with a trustee. Additionally, a consumer proposal is a legally binding document, which means that once your creditors have agreed to it, there is no going back. As such, the proposal will immediately stop all creditors’ and collection companies’ actions. The consumer proposal arranges for the repayment of a portion of your debt – typically 20% to 30% – over a period of up to 5 years, at the end of which, the debt is forgiven.
- Personal bankruptcy is the second legal insolvency process that can be administered by a trustee. As the federal government regulates bankruptcies, the costs generally remain the same, $1,800. Once a debtor has repaid the bankruptcy cost, the debt is forgiven. First-time filers can get debt-free in 9 months.
Only a consumer proposal and the personal bankruptcy can legally eliminate your debts and give you a fresh start.
If you’re looking for a way to get out of debt, get in touch with your local trustee today to regain control of your finances: 877-849-4770.
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
How to Amend a Consumer Proposal
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
Consumer Proposal Eligibility
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
How to File for Bankruptcy
What is Bankruptcy?
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?